Victim of Your (Customer's) Own Success

Abstract

Under the context of digital health, I explore the potential opportunity costs associated with giving customers a sense of success. Using large-scale data from a popular mobile fitness application, I show that many users who enjoy certain past successes (e.g., daily goal achievement) need not necessarily upgrade to the premium version, or even continue using the app. These observed dynamics motivate a structural model of self-reputation, where users learn about their own ability at maintaining healthy behavior. The model estimates reveal that improvements in perceived ability do not necessarily increase their desire to upgrade, and in some cases, may even increase the incentives of quitting. Finally, counterfactual simulations reveal that improvements in the salience of personal performance metrics, while helpful for the user's learning process, would at the same time decrease the number of upgrades.